Shareholders of Rite Aid (NYSE: RAD) must be extremely happy to see that the company's share price has surged from only $1 per share at the beginning of December 2012 to more than $5.20 per share at the time of writing. In the past twelve months, other big pharmacy chains CVS Caremark (NYSE: CVS) and Walgreen (NYSE: WAG) also delivered good returns to investors. While Walgreen has increased by nearly 83% on the market, CVS has had the lowest return among the three at nearly 37.60%. Is Rite Aid a good investment opportunity now? Let's dive in. 

Rite Aid is turning around...
The market performance of Rite Aid has been driven by the growing operating performance of this drugstore chain. Rite Aid has focused on cost savings to improve profitability and cash flow. In fiscal 2013, the company delivered one of the best years in its 50-year history. Its operating income surged by 300% from $162 million in fiscal 2012 to $647 million in 2013, while net income came in at $118 million.

One of the main drivers for Rite Aid's improvement is its wellness and customer loyalty program, which helped make the company a great wellness destination. Its stores have been remodeled and expanded to offer more pharmacy services and different wellness and fitness items. In the past two years, around 1,091 Rite Aid stores have been converted into the Wellness format, and there are currently around 1,700 Wellness Ambassadors who deliver superb service to customers. It is on track to have around 1,200 Wellness stores by the end of this fiscal year.

Fiscal 2014 earnings are expected to come in at a range of $182-$268 million, or $0.18-$0.27 in earnings per share. Rite Aid's management believes that it will deliver decent long-term results for investors with continuing turnaround activity and a high script retaining ratio of 75%, which is a benefit from the Express Scripts – Walgreen dispute. 

... But is highly leveraged
What I worry about with Rite Aid is its highly leveraged position. As of August 2013, it had negative stockholder equity of more than $2.3 billion, while long-term debt came in at more than $6 billion. Net debt/EBITDA (earnings before interest, taxes, depreciation, and amortization) is very high at 5.2. Walgreen and CVS have much lower leverage ratios at only 0.56 and 0.89, respectively. Thus, they could be considered much safer than Rite Aid due to much more conservative capitalization structures.

Walgreen and CVS might be better picks
One more important reason why investors might consider Walgreen and CVS over Rite Aid is dividend payments. While Rite Aid does not offer investors any dividend, CVS offers investors a 1.4% dividend yield, while the dividend yield of Walgreen is even higher at 2.10%. However, CVS is more attractive with a much lower payout ratio of only 23%, whereas Walgreen pays out 45% of its earnings in dividends. If CVS had the same payout ratio, its dividend yield could reach 2.40%.

In terms of valuation, Walgreen is the most expensive at 12 times its EV/EBITDA, while the EV/EBITDA ratios of CVS and Rite Aid are much lower at only 8.6 and 8.2, respectively.

My Foolish take
Rite Aid does not seem to fit in value investors' portfolios with its substantial leverage and lack of dividend payment. Among the three, I like CVS the most because it has a decent dividend yield, a low payout ratio, a reasonable valuation, and a conservative leverage ratio.